Look & learn from across the Irish sea

Undesired Walrus

Penultimate Amazing
Undesired Walrus
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Apr 10, 2007
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Not my words, but that of then shadow chancellor George Osborne in 2006.

In a world where cheap, rapid communication means that investment decisions are made on a global basis, capital will go wherever investment is most attractive. Ireland’s business tax rates are only 12.5 per cent, while Britain's are becoming among the highest in the developed world.

Economic stability must come before promises of tax cuts. If, over time, you reduce the share of national income taken by the State, then you can share the proceeds of growth between investment in public services and sustainably lower taxes. In Britain, the Left have us stuck debating a false choice. They suggest you have to choose between lower taxes and public services. Yet in Ireland they have doubled spending on public services in the past decade while reducing taxes and shrinking the State’s share of national income. So not only does Ireland now have lower business and income taxes than the UK, there are also twice as many hospital beds per head of population.
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Hmm.
 
They want to keep their business taxes low while getting bailed out by the high taxing countries.

There was an analysis of what some of those businesses were who moved to Ireland. One example was a shell company set up by Cadbury Schweppes. It held 500 million pound, but employed no people.
 
I'm not sure that we're much better off than them......
 
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a_unique_person said:
They want to keep their business taxes low while getting bailed out by the high taxing countries.

There was an analysis of what some of those businesses were who moved to Ireland. One example was a shell company set up by Cadbury Schweppes. It held 500 million pound, but employed no people.
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I'm going to take a wild guess and assume that if the corporate tax rates were more competitive in the UK, then Cadbury wouldn't have done that. Which of course, would have deprived Ireland of a large amount of tax revenues. Given that we now have a global economy, countries have to compete with each other on things like corporate tax rates.

Low corporate tax rates (and the increased revenues obtained from them) are part of what allowed Ireland to grow from one of the poorest non Eastern Bloc countries to one of the wealthiest over the past 2 or 3 decades. Ireland's situation is different from that of the PIGS because its debt doesn't come from excessive government spending; its debt comes from guaranteeing the debt of its massively overleveraged banks after the economic collapse, which means that Ireland's problem is an issue of liquidity, not solvency.
 
Oh, by the way, it isn't Ireland that is being bailed out; it is the holders of Irish bank debt (primarily British, French, and German banks) that are being bailed out, at the immediate expense of EU taxpayers and the ultimate expense of the Irish taxpayer.
 
Architect said:
I'm not sure that we're much better off than them......
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You are. But then, Ireland was a rather poor country before it became the 'Celtic Tiger.' Much of their rapid growth was due to FDI. The bigger the boom, the harder the crash.

I fear that Ireland's financial difficulties are going to last for quite a long time.

Their zombie banks are huge compared to the size of their economy, and the government has promised to ensure all deposits therein.

Just look at this graph.
 
Puppycow said:
You are. But then, Ireland was a rather poor country before it became the 'Celtic Tiger.' Much of their rapid growth was due to FDI. The bigger the boom, the harder the crash.

I fear that Ireland's financial difficulties are going to last for quite a long time.

Their zombie banks are huge compared to the size of their economy, and the government has promised to ensure all deposits therein.

Just look at this graph.
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On the upside, Ireland's low corporate tax rates will mean that FDI continues. That's why Ireland fought so hard to maintain its low corporate tax rate, without it they would be well and truly fu doomed.
 
Darat said:
It's a double hmmm - apparently it is in our best interest to loan them what is the figure something like 7 billion, you would have thought since this is being done for our best interest it would be appropriate to place some conditions on the loan that would also be in our best interest?
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Imperialist!!1 :eek:
 
MikeMangum said:
I'm going to take a wild guess and assume that if the corporate tax rates were more competitive in the UK, then Cadbury wouldn't have done that. Which of course, would have deprived Ireland of a large amount of tax revenues. Given that we now have a global economy, countries have to compete with each other on things like corporate tax rates.

Low corporate tax rates (and the increased revenues obtained from them) are part of what allowed Ireland to grow from one of the poorest non Eastern Bloc countries to one of the wealthiest over the past 2 or 3 decades. Ireland's situation is different from that of the PIGS because its debt doesn't come from excessive government spending; its debt comes from guaranteeing the debt of its massively overleveraged banks after the economic collapse, which means that Ireland's problem is an issue of liquidity, not solvency.
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There was a boom and bust, the solvency is not there either. The assets are not worth what they were said to be worth.

Offering a low tax rate to attract business did not necessarily work, either. What jobs does a shell company create? The Channel Islands aren't exactly the Singapore of the English Channel.
 
a_unique_person said:
There was a boom and bust, the solvency is not there either. The assets are not worth what they were said to be worth.

Offering a low tax rate to attract business did not necessarily work, either. What jobs does a shell company create? The Channel Islands aren't exactly the Singapore of the English Channel.
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Germany and France sure seemed to think it worked, because they spent a good portion of the early and middle aughts complaining about "unfair tax competition" and pushing for an EU wide minimum corporate tax rate. I remember Schroeder in particular making lots of noise about it.

http://www.springerlink.com/content/1p2j745q66672133/fulltext.pdf
The recent EU enlargement provides a good example of the consequences for national tax policies of increasing economic integration. In particular the new member states located in central and eastern Europe pursue a tax policy which emphasises the creation of favourable conditions for investment, especially foreign direct investment. This puts the tax policies of the old EU member states under competitive pressure.

...

The tax policy of the new member states has been criticised by leading politicians in particular in France and Germany. These critics argue that the new member states engage in "fiscal dumping" and "unfair tax competition". Moreover, the tax policy development in eastern Europe is quoted as an example of the adverse effects of tax competition in general. In this context, both the German and the French government have argued that the EU should introduce a minimum corporate income tax rate in order to limit corporate tax competition.
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I would argue that a 6% real GDP average growth rate from 1995-2007 is fairly substantial evidence that Ireland's policies did indeed work and did indeed create jobs, evidence of which can be found here.

Hell, Ireland's largest exporter is Dell. Not Guinness, Dell.

http://irelandafternama.wordpress.c...acts-part-1-the-loss-of-competitiveness-myth/
[This is an expanded version of a paper delivered to the Conference of Irish Geographers at NUI Maynooth on May 1, 2010]

Introduction: The importance of exports to the Irish economy
Due to the small size of the domestic Irish economy, Irish-based businesses must look to export markets in order to achieve the economies of scale or specialisation capable of generating high living standards comparable to other advanced economies. The achievement and maintenance of export competitiveness (i.e. the ability of Irish-based firms to compete in export markets) is therefore an essential requirement for the Irish economy’s long-term success. Expanding exports has been a central objective of Irish government policy since the late 1950s and has enjoyed a considerable measure of success as reflected in the ratio of exports of goods and services to GDP which grew from just over a quarter in 1950 to 94% in 2000 – one of the highest such ratios in the world.

The Irish government has mainly relied on inward investment by TNCs as the means of expanding Ireland’s export base, with foreign firms accounting for 89% of all exports of goods and services by 2000 (a proportion which has remained constant in the 2000s). In that year, eleven sectors accounted for three quarters of all exports (Table 1), with Office Machinery & Data Processing Equipment and Organic Chemicals between them accounting for almost 36%. The 1990s in particular were a period of spectacular export growth, the annual compound growth rate of 13.8% (in volume terms) being exactly twice the GDP volume growth rate of 6.9% – itself a very high sustained growth rate over such a long period. Thus, while GDP almost doubled in volume terms in the 1990s, the corresponding volume growth of exports totalled 265%. This saw Ireland’s share of global exports doubling, from 0.64% to 1.22%, between 1991-2000, according to World Trade Organisation (WTO) data.
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It's rather hard to export goods that haven't been manufactured. And even when it doesn't create jobs because some multinational creates some shell subsidiary, it gives the government of Ireland revenue.

US Multinationals Overseas Profits: Ireland's patent income tax-exemption may fund over 5% of Irish Government annual spending in 2006
Ireland's low corporate tax rate of 12.5% on trading profits has been a magnet for multinational companies who are responsible for 90% of Irish exports and a significant contributor to the success of the modern Irish economy, commonly known as the Celtic Tiger.

In addition, an Irish tax exemption on patent income, has promoted the parking of US multinational company overseas profits in Ireland, through transfer pricing and other accounting measures. Ireland is the most profitable location of US multinationals and in the period 1998-2002, the profits of US companies with Irish facilities doubled.

Ireland's annual corporate tax revenue is about €5.3 billion ($6.3 billion). The Wall Street Journal said in its report that a Microsoft Dublin-based company that is used for routing patent a royalty income from overseas operations, paid the Irish Revenue $300 million in taxes last year.

Ireland is the location of top US tech and pharmaceutical firms. Chipmaker Intel has its largest overseas manufacturing facility in Ireland, computer maker Dell is one of Ireland's largest employers and the top global drugs firm Pfizer, employs around 2,200 people at nine operations in Dublin and Cork. One of the products that it produces in Ireland is Lipitor, the anti-cholesterol treatment which is the world's biggest-selling drug.
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And it goes on to list employer after employer who opened up shop in Ireland.
 
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